Auto Bailout Hopes Lift Asia, Japan Climbs 5%

Asian markets made strong gains Monday with both Japan and South Korea climbing 5 percent on renewed hopes for a bailout of the U.S. automaker industry.

Investors have funneled capital back to emerging Asia for the last few weeks. Word the White House was considering using some of $700 billion meant to rescue financial institutions for the struggling car manufacturers extended the trend.

The main attraction in the region throughout this tough year has been China's high growth economy, even though the last few months have seen a severe slowdown. China-related stock funds have drawn a net $1.48 billion in capital so far this year, the only broad category tracked by Nomura to register inflows

Meanwhile, worsening U.S. economic data, a rapidly growing fiscal deficit and the likelihood the Federal Reserve will cut interest rates again this week all combined to push the dollar to a two-month low against the euro.

Oil bounced back $1 to trade above $47 a barrel on signs that OPEC members are set to make a deep supply cut when they meet later this week, in a bid to prop up prices.

Japan's Nikkei 225 Average finished 5.2 percent higher, nearly erasing the previous session's losses, on fresh hopes for a bailout of the struggling U.S. auto industry, boosting shares of carmakers such as Honda Motor. Expectations for the automakers even overpowered the Bank of Japan's tankan corporate survey, which showed that business sentiment has suffered its sharpest fall since 1974 to hit a nearly seven-year low, with market players saying the results had been mostly as expected and already factored in.

South Korea's KOSPI closed 5 percent higher, as automakers rallied on hopes of support for their U.S. counterparts, while construction issues jumped on prospects of higher South Korean government infrastructure spending. Hyundai Motor rose 7.14 percent and Hyundai Engineering & Construction advanced 14.95 percent.

Australian stocks closed up 2.3 percent as global miners such as BHP Billiton jumped on expectations of a rebound in metal prices, but phone company Telstra fell to a two-year low after a government panel rejected its plan for a national high-speed broadband network.

Hong Kong shares rose nearly 2 percent, recouping some of the previous session's loss as shipping and auto issues climbed, but some banks bucked the broader market's gains. China Construction Bank dropped 2.4 percent on a report of a share sale by Bank of America, and shares in BOC Hong Kong declined 4.7 percent as Morgan Stanley downgraded the stock to underweight from equal-weight after the bank issued a profit warning late on Friday. Its parent, Bank of China agreed to extend a $2.5 billion subordinated credit facility to boost the subsidiary's capital base, a move which is seen creating an overhang on the local lender's book value.

Singapore's Straits Times Index was up 2 percent. But shares of Singapore Petroleum fell 4 percent after the company issued a profit warning late on Friday. Singapore's jobless rate was 2.2 percent in the third quarter, unchanged from the previous quarter, final government data showed. Preliminary data in October had also put the third quarter jobless rate at 2.2 percent, confounding expectations firms would cut hiring amid the financial crisis.